strategy & business plans

8/7/2019 Strategy & Business Plans

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Strategy & BusinessPlans

IEI Business Plan Workshops

TL [email protected]

215-204-3079
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Business plan workshops

Matching Products and Services with Markets First one

Competitive Analysis Last week Business Model

Tonight

Market and Sales Monday, November 19, 2001 - 6:00 pm to 8:30pm Financial Projections

Monday, November 26, 2001 - 6:00 pm to 8:30pm


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Feasibility plan outline

Executive Summary

Product or Service

Technology/CoreKnowledge

Target Market

Competition

Industry

Strategy/Business Model Marketing and Sales

Functional Strategy

Production/OperatingFunctional Strategy

Intellectual Property Issues

Regulation Issues

Critical Risk Factors

Timeline

Break-even Analysis


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Strategy can mean many things

Plan

Process

Position Pattern

Perspective

Procedure

Play

Ploy

Strategic Management

Strategic Positioning

Strategic Navigation

Strategic Tactics


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Strategic management

Is a detailed pattern of decisions thatdescribes in some detail what a company will do

in light of what it might do, what it can do,

what its leaders want to do, and

what it should do.

Kenneth Andrews


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Strategic management

Environmental Scanning

Evaluation &Control

StrategyImplementat

ion

StrategyFormulationMission

Disciplinediterative

processof pursuing amission,whilemanagingtherelationship ofthe firm to itsenvironment.


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But pushes beyond the situation

Strategic management is all about chasinga dream

In a disciplined but opportunistic way By developing your assets

To take advantage of opportunities the

world (environment, industry, market) gives While shaping the world when you can.


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Strategic management is about

finding ways to grow...Environmental Scanning

Evaluation &Control

StrategyImplementa

tion

StrategyFormulationMission

Vision


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Two basic strategic options

Position Strategy Unique, valuable, defensible position in a market or

industry

Supported by a tightly integrated value chain /activity system

Good for relatively stable industries/markets

Resource/Navigation Strategy Vision-driven nurturing and leveraging of core

resources Supported by tight culture and explicit learning Good for dynamic industries/markets


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ExternalOpportunities

& Threats

Niche

InternalStrengths &Weaknesses

I. Strategic positioning

A niche is typically themarket the firm is uniquelyqualified to serve


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Classic positional strategies

Cost (price) leadership

Differentiation Quality, design, support/service, image Always starts with the product

Focus Broad or narrow Always starts with a specific market

segment


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Examples of positional

strategies Cost (price) leadership

Crown, Cork & Seal (pennies, plants). Wal-mart (warehousing,negotiation). Motel 6 (location, services, salespeople). Cintas

(plants, logistics). Differentiation

Mercedes (quality). Apple (design). Nordstrom (service).Nike (image). G&K (clean rooms, radiation). Mostentrepreneurs (Zitners, Prompt.)

Focus Wal-mart (broad - rural). Specialty bookshops (narrow -

Giovannis room, NSP). Some entrepreneurs (NRI - changingmix & services).


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Elaborations of positional

strategies Penetrate new markets

Insurance in India. IMS.

Develop new markets E-government. (Disruptive technologies.)

Develop new products Gillette. Intel.

Become indispensable Microsoft. Best subcontactors.

Fortify Borders wholesalers, B&Ns leases.


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TOWS analysis

Strengths(S)

InternalFactors

External

Factors

Opportunities(O)

SO Strategies-------------------------

WO Strategies------------------------

Threats(T)

ST Strategies--------------------------

WT Strategies-------------------------

Use strengths toavoid threats

Min. weaknessesto avoid threats

Use strengths totake advantage of

opportunities

Offset weaknessesto take advantage

of opportunities

Weaknesses(W)


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TOWS analysis exercise

List 2 opportunities & 2 threats

List 2 strengths & 2 weaknesses

Match em up trying to use (or develop) strengths to take advantage

of opportunities while offsetting weaknesses anddefending against threats

avoiding strategies that put weaknesses in way of

threats Use classic strategies -- cost, differentiation,

focus -- as prompts for ideas


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Position strategies require fit

Fit refers to the niche a firm serves and the way itsproducts or services are positioned

But fit also has to do with every other part of the

internal structure of the firm. A well positioned firm craftsitself to serve a niche

better than anyone else

Starting a new firm offers the exciting, seductive,

often advantageous opportunity to craft a perfect fitbetween specific opportunities and internal capabilities.


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Value chain

A strong value chain is a cross-linked net of activities thataffects the cost or performance of the whole.

Supporting a strategy by optimizing both individual functions andthe links between them to support a strategy yields a powerful,durable, hard-to-duplicate advantage.

MarginTechnology

InboundLogistics

Operations Outbound

Logistics

Marketing/Sales

After SalesService

Infrastructure

Procurement

Human Resources


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Value chain for NSP

Smallbut

steadyDesk-top, enterprise, email

Editorial

Trade pbGalleys -review &

hc

Libraryrate

UPS

Direct mailDistributor

Prepayvs

ReturnsGreen

tax

Land trust, warehouse, 501(c)3, friendly capital

Prompt press, newsprint

Cooperative: multiple skills, networks, low-cost, apprenticeship


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Activity system

Is a less linear way of thinking aboutthe kind of internal fit that supports astrategy.

Map crucially interrelated featuresand functions that define a firms

unique skills and strategy. Supports competitive advantage with

reinforcing patterns or systems.


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Ikeas Activity System

Limited

Customer

Service

ModularDesigns

Low Mfg

Cost

Self-

serviceSelection

Self-

transport

Limited

sales staff

Customer

loyalty

Self

-assembly

Suburban

Location

Mostitems in

stock

Design

focused on

low cost

Explanato

ry labeling

Easy

transport

Flat

packing

kits

Wide

variety

Long-term

suppliers

Year-

round

stocking

On-site

inventory

Impulse

buying

High-traffic

store

layout

Easy to

make


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Experience curve

For positional strategies, experience is the ultimatesource of advantage.

Experience fuels the tacit knowledge that drivesproductivity improvements, innovations, elaborationsof strategy, etc

Successful firms are especially good at creating the

social and institutional structures that support theshared development of such tacit knowledge


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Value chain or activity chartexercise

Draw the value chain for your firm

Note reinforcing (and jarring) pieces

Try to create more reinforcementsOR

Jot down functions and features

Look for patterns and connections Try to crystallize patterns


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Strategic navigation depends ontiming

ompetitiveEdge

Launc

h

Exploitation Counterattack

Strategic Window

Time

Rapid change erodespositionsleading totemporaryopportunities


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Strategic navigation requiresvision

Vision pullsfirms forward

Strategic intent is vision manifest as focused ambition: Lengthens organizational horizon

Promotes focus on ends Encourages creative means

Promotes consistency between evolving short-term goals and morestable long-term ones

Promotes focused resource allocation

Tends to motivate


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Strategic navigation builds oncore assets

Flexible strategies require core assets plus a commitment to developing them

Assets are sources of future value Tangible, intangible Owned or not (but available)

Often with a useful life

Often people: customers, employees, organizationalknowledge

Especially core competencies: special knowledge and skillsembedded in employees and systems


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Four arena analysis

Trace escalating competition along ladders Trying to predict shifts to new areas

Cost/Quality Cintas: Ever better plants and routes

Timing/Know-how Aramark: Bought into corporate uniforms

Barriers to entry New plants, sophisticated logistics, global reach

Deep pockets Slugging it out -- and sometimes buying out small fry


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Navigational strategies

Find loose bricks Stake out undefended territory, fly low, cherry

picklooking for a beachhead, not a niche (Honda) Change the terms of engagement

Sidestep barriers to entry (Canon)

Collaborate License, outsource, joint venture to gain

information and knowledge and advantage as go(lamp shades to ceiling fans)


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Navigational strategy exercise

What is the rate of change in your industry ormarket?

What is driving change? In what arenas is competition focused?

Cost/Quality, Timing/Know-how, Barriers toEntry, Deep Pockets?

How might you take advantage of flux in yourfield?


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A business model describes what a firm will do, andhow, to build and capture wealth for stakeholders

Effective business models operationalize goodstrategies -- turning position, fit, etc (or vision andresources) into wealth

Start-ups offer the opportunity to craft a perfectfit between specific opportunities and internalcapabilities.

III. Business models


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Build Wealth Through an alchemical transformation of inputs into something

that customers value enough to pay for at more than cost

Or through developing enough potential to be bought: valuablepositions, know-how, customers

Capture Wealth Private or public sale

Profit: Revenues plus cost control

Plus: The good life, a rich family life, entrepreneurial success,social impact

Business models build & capturewealth for stakeholders


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1. Describe the landscape: Porter + OT. Environment, industry, and relevant trends.

2. Paint in competitors: Competitor table. Perceptual maps. What do you need to play? How do competitors

compete? What opportunities exist?

3. Identify strengths & weaknesses Vision, skills, core technologies

4.Choose a position/strategy

Business models start withstrategy


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4. Identify stakeholders you must serve Owners, family, workers, community

5. Identify the wealth you will capture Capital, good life, family life, fame

entrepreneurial effectiveness, social value

6. Sketch a structure that willoperationalize the strategy Value chain or activity system

Business models enclose wealth


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6. Work out the implications Functional strategies

Timelines: Ie., the path to profitability,sale or other realization of value

Financial projections & capital needs

Business models definestructure


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Build a business model exercise

Strategy

Stakeholders Wealth

Model

Structural implications

Revise model


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IV. Functional implications ofthe business model

Marketing and sales

People, management, governance Operations

Finances


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Marketing and SalesFinance

Next week: Marketing & Sales

Two weeks: Things Financial Now: Miscellaneous thoughts on

people, management, governance

and operations


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People

Employees, managers, stakeholders

More important even than cash Effectiveness, pleasantness

Most difficult resource to find, tokeep and to manage


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Business systems

OwnershipPressures

Managerial

Pressures

Family/StakeholderPressures


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Business systems dynamics

Each system has its own logic, its own bottomline Ownership: Wealth creation & maintenance Family & Stakeholders: Relationships Management: Efficiency & replicability

Each has its own time horizon Ownership: Ten years or one working life Family & Stakeholders: Reproduction of

generations

Management: Quarterly or annual results


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Governance defines the circlesand the relationships

Who decides what Owners, key employees, key customers, family

members, professional advisors

The decision makers for each circle Owners (board of directors)

Managers (management team)

Family/stakeholders (council)

The scope of their decisions

Their responsibility to each other

Conflict resolution


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Governance example

Company with strong family ties & 3 sons

Owners retirement needs drive succession Two sons buy business (not land) from father

CEO-in-training - 50.+%; Sales manager 50-% Board advisors

Family needs led to side business: Graphic artist, co-owned by CEO-in-training and serving main

business

Management needs turn alliance into new web-basedbusiness


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Governance structures

Direction Vision, values, culture

Formal visioning Cultural maintenance

Agreements

Contracts, bylaws Support

Facilitators, advisors, models


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Sharing the vision

Vision provides both energy andstability.

Core Ideology anchors the team Dynamic Envisioned Future draws the

team forward Long-term, audacious goals Concrete, vivid description of the future


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Value driver analysis

Probability of

Success

Impact

[Time Frame]

L

H

H

Intervention

B

Intervention

Z

Intervention

A

Intervention

X

Intervention

CIntervention

Y


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Value driver analysis

Work with teams (management, boards,stakeholders) to

List possible projects or initiatives Rank each by magnitude of impact

Rank each by probability of success

Place them on the matrix Concentrate on high value/high

probability options


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Value of the analysis

Focus No low hanging fruit, no wild gambles

Process Generates commitment Builds trust

Brings data and analysis To what is for most entrepreneurs, intuitive

Models a useful tool


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Legal structures

Corporations are liability and task entities With governance implications

Sole proprietorships S corporation

Partnerships

C Corporations

LLC Stakeholder Corporations

ESOPs, cooperatives, joint ventures, communitycorporations


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Support structures

Boards of advisors Next size up, pay

Professional team Accountant, lawyer, coach, tie-breaker,

insurance?


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Governance section

Key stakeholders and how and whythey count

Legal structure Key agreements that distribute power

and responsibility


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Management responsibilities

Vision Blends personal & organizational visions

Fosters common culture

Strategy Environmental scanning

Strategy

Measurable objectives Resources

Tools, systems, education


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Management responsibilities

Systems Efficient, effective processes

Fit between systems

Relationships

Staff development


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Responsibility charting

Provides a language and forum fordiscussing decision making -- at

governance, management or staff level. Creates greater clarity about how

decisions are to be made and who will

be accountable for those decisions. Allows for a discussion of the difficult

issues of power and authority.


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DECISION:

Roles Involved

CEO Oper. Sales Fin.

Approve

Responsible

Consult

InformedTypeso

fParti

cipation

Responsibility chart


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Responsibility chart details

Approve Sign off on decisions

Veto power

Final responsibility to commit resources

Shares accountability

Responsible

Takes the initiative, develops alternatives,recommends, implements.

Accountable for results


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Responsibility chart details

Consult Input but no veto power

Inform Notify


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Management team section

Names & Experience Resumes

Missing members Recruiting plan

Advisors & roles Recruiting plan


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Operations

What you do

How you do it

Cost implications


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Operations Examples

Arbill computerized information, pay incentives,

training, culture, evidence Anderson

architected solution simplifies training and

control and resource management ties in with knowledge management


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Operations section

Key processes & strategy

Efficiency / cost control

Recruiting, training, evaluatingstrategy

Fit with overall strategy Continuous improvement


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Operations exercise

Sketch out basic operational steps

Note cost assumptions

Create research list to confirmassumptions, fill in gaps, collectnumbers


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Bibliography

Verna Allee, Reconfiguring the Value Network, The Journal of Business Strategy, 21 (4),PP 36-39.

R Boulton, B Libert, S Samek, A Business Model for the New Economy, The Journal ofBusiness Strategy, 21 (4), July-August 2000, pp 29-35.

James Collins & Jerry Porras, Built to Last(HarperBusiness, 1994).

Richard DAveni, Hypercompetition(Free Press: 1994). Kathleen Eisenhardt & Donald Sull, Strategy as Simple Rules, Harvard Business Review,

January 2001.

Mark Feldman & Michael Spratt, PWC, Five Frogs on a Log: A CEOs Guide to Acceleratingthe Transition in Mergers, Acquisitions and Gut Wrenching Change, (HarperBusiness1999).

Pankaj Ghemawat, Strategy and the Business Landscape(Prentice Hall, 2001).

G. Hamel & C. K. Prahalad, Strategic Intent, Harvard Business Review, May-June 1989. Robert Hamilton lecture notes, 1998.

Robert Hamilton, E. Eskin, M. Michael, "Assessing Competitors: The Gap betweenStrategic Intent and Core Capability", International Journal of Strategic Management-Long Range Planning, Vol. 31, No. 3, pp. 406-417, 1998


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Bibliography, cont.

TL Hill lecture notes, 1999, 2001.

J. D. Hunger & T.L. Wheelan, Essentials of Strategic Management(Prentice Hall, 2001).

Ivan Lansberg, Succeeding Generations(Harvard Business School Press, 2000).

B. Mahadevan, Business Models for Internet-based E-Commerce, California Management Review, 42(4), Summer 2000, pp 55-69.

Henry Mintzberg & James Brian Quinn, Readings in the Strategy Process, 3rd Edition(Prentice Hall,1998).

Alex Moss, Praxis Consulting presentation on worker ownership, 1999

Sharon Oster, Modern Competitive Analysis, 2nd Edition(Oxford University Press, 1994).

Michael Porter, Competitive Advantage(Free Press, 1985).

Michael Porter, What is Strategy?, Harvard Business Review, November-December 1996.

Jim Portwood lecture notes, 1998.

C.K, Prahalad & G. Hamel, The Core Competence of Corporations, Harvard Business Review, May-

June, 1990. Pamela Tudor, Notes on responsibility charting, 1999


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Evaluation

What was the most useful part oftodays workshop?

Least useful?

What should I definitely keep thesame?

What should I change -- and how?

strategy & business plans

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